FINANCIALS: Rabobank: Solid Results, Positive For ABN, Too

Rabobank (RABOBK: A3/A-/A+) reported 1H24 results this morning. Spreads have broadly tracked the sector and results look solid, even the lower CET1 is largely a function of cautious model adjustments, we believe. Credit quality is stable-to-better. Caution is rarely a spread negative and these are a good lateral into ABN results (tmrw).

• Credit stats: loan losses are down 18% (y/y) to 13bp (from 16bp) and continues to be below mgmt’s assessment of long-term through-cycle expectations of 20bp. Domestic retail saw releases – positive for ABN (reporting 7-Aug). Non-performers are stable on Dec-23 at 1.9% of lending. CET1 ratio is 16.3% with a 0.4% reduction from the certificate tender offer (RABOBK 6.5% Perp, tendered for on 16-Apr), alongside some model adjustments.
• Underlying revenues are 7% up, with a good NIM performance and better fees, including a bump from capital markets activities. Underlying pre-tax is therefore 14% higher y/y.
• Spreads have outperformed €IG banks marginally since last results (8-Feb) but have tracked the peers more recently, so there’s not much expectation built in here. The obvious question is around the RWA model inflation, which tends to be as mgmt take a more cautious forward macro view, and how that tallies with flat non-performers and lower loan loss charges. Either way, caution is rarely a spread negative, we feel.

Conf call is 1300 (London time) at: https://channel.royalcast.com/rabobankinvestors/#!/rabobankinvestors/20240806_1